This chart shows why bank index will remain under pressure

Special to Firstpost

CNX Nifty (5,995.45): The index moved in line with expectations and met with resistance near the 6,220-6,250 range mentioned last week. The failure to get past the resistance zone is a sign of weakness and there is a fair chance of a slide to the immediate support at 5,800-5,850 range.

The short-term bearish view would be under threat if the index moves above the recent high of 6,213. Unless there is a breakout past this level, the path of least resistance would be on the way down. A look at the influential sectors such as banking, FMCG and IT sectors short-term weakness which dims the chances of a strong up move in the Nifty.

[caption id=“attachment_1168099” align=“alignleft” width=“380”]  Nifty ends below 6000[/caption]

From a short-term trading perspective, short positions may be considered on any recovery with a stop loss above 6,220, for a target of 5,800. A breakout past 6,220 could open up the possibility of a rally beyond the all-time high of 6,358.

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CNX Bank Index (10,677.35): As expected last week, the index moved up and reversed just a touch short of the resistance zone at 11,250-11,300. The short-term outlook for this index too is bearish and a breakout past 11,250 is required to invalidate the negative outlook.

A look at the chart patterns in the leading private and public sector banks strengthen the bearish case scenario for the bank index. Axis Bank, Bank of Baroda, State Bank of India and ICICI Bank may play a key role in keeping the bank index under pressure.

Until the index moves above 11,300, there would be a strong case for a slide to the short-term support at 9,700-9,750 range. From a trading perspective, any minor rally may be used to short the index with a stop loss at 11,300 and target of 9,750.

Cummins India (Rs.429): After a minor downward correction, the stock appears to have resumed its short-term uptrend. The short-term outlook is bullish and the stock could test the immediate resistance at Rs 468.

[caption id=“attachment_1245001” align=“aligncenter” width=“600”]  Chart[/caption]

Long positions may be considered with a stop loss at Rs.411 and target of Rs.468. The uptrend would gather momentum on a breakout past Rs.460 and the stock could then rally to the major resistance at Rs.480.

LIC Housing Finance (Rs.211.60): While this stock has cracked sharply this week, the price action in Friday indicates that a short-term low is in place. The completion of a bullish “Key Reversal Day” pattern is a sign that the stock could seek higher levels from a short-term perspective.

Investors may buy this stock with a stop loss at Rs.206 and target of Rs.227. A rally beyond the first resistance at Rs.227 would propel the stock to the major resistance at Rs235.

(The views and recommendations featured in this column are based on the technical analysis of historical price action. There is a risk of loss in trading. The author may have positions and trading interest in the instruments featured in the column.)